Sun: 09th Oct 2011

Italy’s rating was cut by Moody’s Investors service for the first time in almost two decades. Its been lowered from A2 to Aa2 with a negative outlook. They also said that all the European countries with ratings below the top mark AAA may face downgrades as many euro-area governments are facing “ a profound loss “ in investor confidence as policy makers have failed to stop debt-crisis contagion.

Moody’s also downgraded the SBI bank financial strength rating to D+ from C-. As a result of the lower BCA, the Hybrid debt rating was downgraded to Ba3(hyb) from Ba2(hyb). On Wednesday all the banks were the worst effected and so as the market.

Rupee dropped below 49 vs $ after data showed the current account deficit widened and concerns about the global economic outlook curbed demand for emerging market assets. Overseas investors trimmed their holdings of Indian equities by $626 million in the week.

Food Inflation index rose to 9.41% and the fuel price index climbed 14.69% in the year to Sep 24.

Markets continued with its volatility. With 4 trading session in a week. Indices closed down 1-1.5% with a sharp bounce back on the last day of the trading session. Sensex bounced back 440 points and Nifty 137 points.

Last week I had mentioned about the trendline, which on break will surely create panic in the markets. Nifty on Monday opened with a deep gap down. The panic selling continued for 3 continuous days. FII’s sold nearly Rs.3KCr in the Indian markets within these 3 days. Nifty once again made a low of 4728 and bounced back on the last trading session and closed at 4888. The last time the same scenario was seen when the Nifty made a low of 4720 on 26^th Aug 2011, and from there onwards Nifty once again changed its trend and recovered sharply to make a high of 5169 in just few session. The same situation is not promised this time. As this is the second time it has come to 4720 levels. Break below this will surely take the nifty to 4600 levels.

If the nifty make a double bottom and bounces back then rally should stop at 4911-4970 levels. As I have mentioned in my last article also that the Indian markets are bound to see high volatility. Last time we had discussed about the MACD which was suppose to give negative divergence. And that did happen this week.

FII’s continued selling. They sold stocks worth Rs.3500Cr from 30^th Sep to 05^th Sep. DII’s bought stocks worth Rs.1600cr.

Last weeks call

Sell Adani Ent close below 523 SL 531. Made a low of 447.

Buy Asian paint above 3170. SL 3154. Did not trigger the price

Sell Axisbank below 1030 SL 1039. Made a low of 945.

Sell Hero corp below 1940 SL 1946. Made a low of 1904.

Sell Hdil below 95 SL 97. made a low of 89.

Sell IDBI with SL of 103.75. Made a low of 94.45.

Call for the week

Buy Asian paint above 3170

Buy JP Ass above 75 Sl 72.50